Emerging market currencies showed a mixed performance on Monday as geopolitical tensions between the US and Iran eased. The Japanese yen, however, firmed to a three-month high against the dollar after a rare coordinated intervention by the US and Japanese authorities. This intervention was aimed at halting the yen's slide from near 40-year lows of 163.99 per US dollar, with the yen strengthening by over 0.5% to 156.70 per US dollar. US Treasury Secretary Scott Bessent confirmed the intervention, stating that additional joint actions could be taken if necessary, and also mentioned the possibility of increasing the Federal Reserve's repurchase facility for temporary dollar liquidity.
Despite the positive development regarding the yen and easing Middle East tensions, Asian stock markets largely retreated. Japan's Nikkei 225 dropped by 0.9% to 1.2%, South Korea's KOSPI fell sharply by 5.1% to 5.4%, and China's Shanghai Composite declined by 0.7%. Hong Kong's Hang Seng traded flat. The significant decline in South Korean stocks was largely attributed to a selloff in AI-related tech stocks, with chipmakers SK Hynix and Samsung Electronics both seeing their shares fall by over 8% due to overvaluation concerns in the semiconductor sector.
Oil prices also reacted to the improved geopolitical outlook, with Brent crude futures sliding by more than 5% to approximately $83.40 to $83.59 a barrel. Gold prices, conversely, climbed by 0.6% to $4,070 per ounce, benefiting from reduced geopolitical risk perception and a diminished likelihood of rate hikes. While the easing of US-Iran tensions brought some optimism, global markets remained mixed, influenced by concerns over chip overvaluation, a lack of positive economic signals from Asia, and global bond yields, all of which continued to dampen risk appetite.
